Termination of Agency and Relevant Remedies
AssignmentTopic
Alpha GmbH (Alpha) is a successfulGerman green electricity and gas company who decided in June 2019 to enter theBritish market. Its most senior management agreed on the following businessmodel for the UK: Alphas employees should focus on the supply of energy whilesales (to both individual and corporate customers) should be delegated toagents. Thus, Alpha concluded between January and April 2020 indefinite termagency agreements with around a dozen individuals as well as a company, EpsilonLtd. (Epsilon). Epsilon advertises itself as the high quality but low-costsolution on the commercial agency market. It employs only two directors. Theirmain task is to conclude, on behalf of Epsilon, agency agreements withindividuals with strong sale experience in the specific market considered bytheir client, i.e. electricity and gas in the case of Alpha. In considerationof their sale experience, Epsilon pays its agents a higher than averagecommission (with an upper limit of 30% of Epsilons own commission from Alpha).Epsilon concludes with its agents automatically renewable non-exclusive fixedterm (four months) agreements subject to Chinese law. The latter states thatany commercial agency agreement may be terminated at any time without anycompensation or indemnity and that this rule cannot be derogated from by theparties in their contract. Thanks to its past and on-going experience in theenergy sector, Epsilon has been able to hire around 200 experienced agents tomarket Alphas products.
Part1 (2,250 words):
In September 2020, Alpha learnt thatit was unfortunately under investigation by the UK Regulator for mis-selling.The Regulator has indeed received numerous complaints from consumers, inparticular vulnerable consumers who claim to have received misleadinginformation. After an internal investigation, Alpha believes that the problemlies with three agents in particular, who were recently hired and are still ona trial period of six months. Alpha therefore decides to let go these agentswith immediate effect. To be on the safe side, and avoid further potentialmis-selling issues due to the lack of experience, Alpha has also decided to letgo all other agents on a trial period. It has therefore given a one-week noticeto two other agents, as per the agency agreement. At the same time, Alpha tookthis opportunity to get rid of two agents who have been performing very badly,bringing only one sale per week on average in the last seven months. Theircontracts were immediately terminated. One agent also spontaneously ended lastweek his agreement with Alpha as he has contracted COVID-19. In all the abovecases, Alpha has not provided any termination payment, relying in particular onthe explicit exclusion in the agency agreement of any termination payment whileon trial period or the breach of the agency agreement for poor performance.
Please advise Alpha on its legalposition under the Commercial Agents (Council Directive) Regulations 1993.
Part2 (2,250 words):
Yesterday, Alpha received a letterfrom the UK Regulator stating that it was forced, with regret, to hand Alphawith a 2.4 million pounds fine for continuous and significant breach of itslicence to supply energy. Furthermore, Alpha is prohibited from sellingelectricity and gas in the UK for the next five years. All 78934 existingcustomers will be moved to another energy supplier within the next 30 days. TheRegulators decision is effective as of tomorrow. As a consequence, Alpha iscurrently texting or phoning all its remaining agents for the UK market, aswell as those hired by Epsilon, stating that their agreements will beterminated starting tomorrow and that unfortunately no termination payment willbe made given the exceptional circumstances the company finds itself in.Moreover, Alpha reserves itself the right to claim back from its agents andthose hired by Epsilon the 2.4 million pounds fine: at the end of the day, theywere solely responsible for the sales, were not they?
Please advise Alpha on its legalposition under the Commercial Agents (Council Directive) Regulations 1993.
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